Non-resident Rental Income Tax Basics

Non-Resident Rental Income Tax Basics

Tax season can be stressful, especially for non-resident landlords. If you own a rental property in Canada but live abroad, it’s essential to understand how your rental income is taxed and what forms you need to file.

This guide explains the basics of NR6 and Section 216, two key parts of Canadian tax law that affect non-resident property owners.

The Standard Approach: Remitting 25 Percent of Gross Rent

As a non-resident landlord, the simplest way to comply with Canadian tax law is to remit 25 percent of your gross rent to the CRA each month.

When you do this, the CRA gives you up to two years to file a tax return. If you fail to file within that period, the CRA assumes your 25 percent remittance fulfills your tax obligation.

However, for many landlords, sending 25 percent of gross rent each month feels excessive. Fortunately, there’s a second option that may reduce your payments.

The Alternative: Filing an NR6 Form

An NR6 allows you to project an estimate of your net rental income—your income after expenses. Once the CRA accepts your NR6, you can remit 25 percent of your net income instead of gross revenue.

This can significantly lower your monthly payments. But remember, once you file an NR6, you must also file a Section 216 return by June 30 of the following year.

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Why You Must File Section 216

A Section 216 return finalizes your NR6 reporting. It compares your estimated income with your actual earnings and expenses.

If you fail to file your Section 216—or use the wrong form—the CRA can charge both you and your guarantor (often your property manager) penalties and interest.

Your NR6 isn’t complete until the Section 216 is submitted.

How Section 216 Reporting Works

Section 216 reports on all rental income earned during the active period of your NR6:

  • If your NR6 covers the full year, Section 216 reports income for all 12 months.
  • If your NR6 was cancelled mid-year, Section 216 covers only the active months.
  • Any rent earned after cancellation must be reported on a T1 General.

Missing the filing deadline triggers a penalty of 25 percent of your gross revenue during the NR6 period.

Because of this, our team works closely with clients to ensure both the NR6 and Section 216 are filed accurately and on time.

Quick Tips and Takeaways

  • If you collect rent in Canada but live in another country, the CRA considers you a non-resident landlord.
  • You must either:
    • Remit 25 percent of your gross rent to the CRA, or
    • File a Section 216 and remit 25 percent of net income (rent minus expenses).
  • Always file both your NR6 and Section 216 correctly and on time to avoid penalties.
  • The deadline for Section 216 filing is June 30 each year.
  • If you send your forms by mail or courier, keep proof of delivery.
  • If you fax your return, keep the confirmation sheet.

Final Thoughts

Filing non-resident tax forms correctly can save you thousands in penalties and overpayments. The key is to stay organized, meet every deadline, and work with an experienced property-management team familiar with CRA requirements.

If you’re unsure about your next steps, speak with your property manager or tax advisor. Staying proactive keeps you compliant and ensures you retain more of your rental income.